Two Major 2024 Healthcare Cost and Industry Changes Advisors Need To Know
February 7, 2024
Whether you’ve been having healthcare conversations with your clients for years or discussing healthcare-related topics in your client meetings is a totally new concept to you, this blog is for you. Just like the financial planning industry, the healthcare industry (more specifically, the health insurance industry) is ever-changing. New legislation, changes to existing rules, the addition or elimination of health plan options in different locations, and much more mean that it’s crucial to stay on top of the most important trends and news in healthcare. Doing so will help ensure your clients’ financial plans aren’t negatively impacted, and can also reveal ways to improve their financial plans.
But there’s no way you can keep up with it all. So, what are the two major changes you need to know going into 2024? What healthcare cost and industry trends can you and your clients expect to see? Keep reading!
The largest insurance cost increase for employers in over a decade
Reuters reported that benefit consultants expect to see employer healthcare costs jump 5.4% to 8.5% in 2024 due to, “...medical inflation, soaring demand for costly weight-loss drugs, and wider availability of high-priced gene therapies.”
Luckily for employees, over two-thirds of employers do not plan to shift the burden of this cost increase onto their employees. However, that doesn’t mean that employees won’t be impacted at all. Rather than increasing employee’s share of health insurance costs, employers may choose to select cheaper health plans that are less comprehensive in coverage and benefits. A worker whose employer is part of the one-third who plans to shift the higher health insurance costs down to employees can expect to pay more in monthly premiums.
Unluckily for employers, this increase could pose a major obstacle to their financial success. If you have clients who own their own business, and that business has more than 50 employees, you may want to schedule a meeting to ensure these added costs are planned for so that they don’t come as a surprise.
What financial advisors can do.
The Open Enrollment period for companies can be at any time of the year. Start asking clients when their annual review period is, make notes in your CRM, and set a reminder in your calendar for when that time comes. That way, you can be the client’s go-to person during their benefits election and you can help clients find areas to reduce their costs to offset any increases in healthcare costs. When Open Enrollment does come around again, you can look over your client’s options with them and ask them a series of questions to help them determine what their ideal plan options will be.
If you have a client who is a business owner with more than 50 employees, it could be helpful for you to have a meeting with them and a benefits consultant to determine their best options for providing affordable health insurance for their employees and themselves.
A third solution is to explore the Marketplace. It’s possible that coverage can be purchased via the Marketplace at a lower cost depending on the percentage subsidized by your client’s employer and the cost of insurance where they live.
An increase in Medicare Part D premiums
Many Medicare Part D beneficiaries have discovered that their costs will be much higher in 2024. A new research report by HealthView Services found that many Medicare Part D beneficiaries in California, Florida, New York, Pennsylvania, and Texas will see their premiums jump, on average, by 42% to 57%.
This is partly because of The Inflation Reduction Act, which failed to stop the increase in Part D premiums. The law included a provision to cap the annual growth of Part D base beneficiary premiums at 6%, but the law did not apply this 6% cap to individual plan premiums that enrollees pay. Part D premiums vary across the plan chosen by beneficiaries, and additional costs apply based on income and any late enrollment penalties.
KFF estimates that the average enrollment-weighted monthly premium for Medicare Part D stand-alone drug plans will be $48 in 2024—up 21% from $40 in 2023.
HealthView Services stated in their recent report:
“In 2025, the cap will be reduced to $2,000, with about one-quarter of current Medicare Part D beneficiaries expected to benefit from this lower limit. These changes will reduce co-pays for some retirees – especially those with chronic health conditions – but shift more responsibility for catastrophic coverage onto Part D plan providers, as anticipated by industry experts including the Kaiser Family Foundation (KFF). Although the goal of The Inflation Reduction Act – which does not address premiums – is to reduce costs for retirees, it would appear to be driving higher Part D premiums in 2024 (and potentially in 2025).”
What financial advisors can do.
If you have clients on a Medicare Advantage plan, we’re currently within the annual Medicare Advantage Open Enrollment period. Most plans include Medicare drug coverage (Part D), so make sure to review the drug coverage and costs of the Medicare Advantage plans that your client is considering. Clients have until March 31 to make their changes before it’s too late and they are stuck with their plan for the remainder of the year.
If your client is on Original Medicare and already picked a standalone Part D plan during the fall Open Enrollment period, they’re unfortunately stuck with it until next fall unless they qualify for a Special Enrollment Period. If your client is concerned about how much of their income (fixed or not) they’re spending on drug plan premiums, there are a few strategies you can implement. If they have a Health Savings Account (HSA), they can use those funds to pay for their Part D premiums. Additionally, you can help reduce a client’s overall drug costs by helping them identify more affordable versions of their prescription medications. Examples would include speaking to their doctors about switching to generic versions of medications or shopping around on sites like GoodRx. When Medicare Open Enrollment rolls around again in the fall, make sure to conduct a thorough HealthPlanning Analysis with clients to ensure they know which coverage options are best for their needs, preferences, and goals. Similar to the employer Open Enrollment period strategy discussed above, set reminders in your calendar to reach out to clients about this critical time of the year.
There are many other healthcare policies and trends I could talk about, but these two are by far the most pertinent to financial advisors, in my opinion. The main takeaway here is that inflation is affecting everything, including healthcare costs. It’s helpful though to understand which costs, exactly, are increasing and who it impacts the most. It’s also helpful to know about certain healthcare policies and legislation that can affect clients (or yourself!) Although our team here at Caribou focuses on personalized HealthPlanning Analyses, we stay on top of the latest in healthcare industry changes and news to ensure we’re providing the most accurate analyses and information possible. So revisit this blog often and our Resource Center for helpful information and insightful data on the importance of including healthcare costs and coverage in your financial plans.